How CFPB Section 1033 Transforms Open Banking: A Guide for Banks, Fintechs, and Consumers in the US

The finalization of Section 1033 ushers in a new era of open banking in the U.S., giving consumers more control over their financial data and encouraging greater competition in the financial services industry. 

While the new rule presents significant challenges for financial institutions, fintech companies, and data aggregators, it also offers immense opportunities for innovation and improved financial health. 

By adopting secure, standards-compliant APIs from partners like Bankableapi, financial institutions can not only ensure compliance but also lay the groundwork for a future-proof open finance strategy that drives value for both consumers and businesses alike.

What Is the Consumer Financial Protection Bureau (CFPB)?

The CFPB is a U.S. government agency created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Its primary mission is to protect consumers from unfair, deceptive, or abusive practices by financial institutions. The CFPB is responsible for implementing and enforcing regulations that ensure consumers have access to safe and transparent financial products and services.

One of the bureau's main objectives is to ensure that banks and other financial institutions follow the rules designed to protect consumer interests, including those related to financial data access and sharing. The development and enforcement of Section 1033 falls under this mandate.

What Is Section 1033?

Section 1033 of the Dodd-Frank Act grants consumers the right to access their financial data held by banks and other financial institutions. It provides consumers with the ability to request and share data such as account balances, transaction histories, and bill payment information with third-party services, empowering them to make more informed financial decisions.

Section 1033 has been in the works since 2016, and it aims to enhance consumer control over personal financial data while fostering competition within the financial services sector. The final rule, known as the Personal Financial Data Rights rule, mandates that financial institutions, aggregators, and third-party service providers adhere to strict data-sharing protocols and ensure the security of consumer data through secure application programming interfaces (APIs).

Key Rights Granted to Consumers Under Section 1033

The Section 1033 rule outlines specific rights for consumers regarding the access, control, and sharing of their financial data:

Access to Financial Data

Consumers are entitled to access critical data such as account balances, transaction histories, bill payments, and detailed product information held by financial institutions.

Control Over Data Sharing

Consumers can allow third-party applications, such as budgeting tools or personal finance apps, to access their financial data regardless of the institution holding that data.

Informed Consent and Revocation

Consumers must provide clear consent before their data is shared, and they can revoke that consent at any time. Consent must be re-authorized every 12 months.

Transparency

Financial institutions and third-party providers must disclose what data is being collected, how it is being used, and who it is being shared with. Consumers must be fully informed of these details before sharing their data.

Data Protection

Banks and third-party services must adopt robust security measures to protect consumer data from unauthorized access and breaches. This includes using secure APIs to facilitate data-sharing processes.

Compliance & Enforcement

The CFPB is responsible for ensuring that financial institutions comply with these data rights regulations, establishing a level playing field across the financial sector.

How Section 1033 Works in Practice

Section 1033 requires financial institutions and service providers to offer consumers access to their data via secure, standardized APIs. These APIs must be designed to ensure that consumers' financial data can be shared safely with third parties, such as fintech companies, as well as used for value-added services like personal financial management tools.

By facilitating easier data sharing, Section 1033 aims to:

1. Promote competition: Enabling third-party services to access financial data creates opportunities for new services and innovations that can benefit consumers.
2. Enhance financial transparency: Consumers gain better insights into their financial status, which allows them to make more informed decisions.
3. Increase consumer control: Consumers can decide which third parties can access their financial data, ensuring they are in charge of their personal information.

The rule establishes a framework for how certain categories of financial data must be made available via secure APIs. This includes account information, transaction histories, payment initiation data, and more. These data sets allow consumers to gain a comprehensive view of their financial health and facilitate better interactions with third-party services.

How Section 1033 Impacts Financial Institutions, Fintech Companies, and Data Aggregators

Banks and Financial Institutions

Banks and other financial institutions are now required to implement secure, standardized APIs to enable the sharing of consumer data with third-party services. They must also protect this data from unauthorized access and breaches, provide clear consent mechanisms, and prepare for audits to ensure compliance with Section 1033. Financial institutions must also maintain detailed records of data sharing and consent activities.

Data Aggregators

Data aggregators, which collect and organize financial data for third-party applications, must follow strict security protocols and ensure that only authorized parties can access the data. This introduces new requirements for third-party risk management (TPRM) to ensure that all parties involved in the data-sharing process are compliant with the rules.

Fintech Companies

Fintech companies, or third-party providers, can access consumer financial data through secure APIs, but they must obtain explicit consent from users. These companies are also responsible for ensuring the security of the data they access and cannot use it for any purposes outside the scope of the consumer's request, such as advertising or cross-selling.

Section 1033 Compliance Deadlines

Financial institutions must comply with Section 1033 according to a tiered timeline based on asset size and receipts. The deadlines for compliance vary, with the first set of institutions facing a deadline of April 1, 2026, and subsequent deadlines for smaller institutions stretching into 2030.

Challenges for Financial Institutions

While Section 1033 offers significant benefits, it also presents challenges for financial institutions, particularly in managing consent, ensuring secure data-sharing practices, and integrating APIs with existing systems. Banks must also invest in the resources required to maintain compliance and improve the customer experience as open banking evolves.

Partnering with Bankableapi helps banks enhance consumer experiences, create new revenue streams, and stay ahead of open finance trends while ensuring compliance. Bankableapi offers an easy way for banks to meet Section 1033 compliance, providing secure APIs, ensuring data protection, and enabling future-ready open finance strategies.